As members of Congress ask state officials about cryptocurrency mining in Texas, here are some questions and answers about the rapidly growing industry.
What exactly are cryptocurrencies?
Bitcoin and other cryptocurrencies are sometimes referred to as “virtual money.” They can be used to make financial transactions without requiring the use of banks, credit card companies or other middle-agents. They rely on a technology called blockchain. In the case of Bitcoin, for example, miners are rewarded with the cryptocurrency after creating and adding new blocks by solving complex computational problems. Companies are building massive computing facilities to crack those complex problems in order to earn Bitcoins.
Are any of these operations located in Texas?
Yes — big time. A Bloomberg article from earlier this year cited estimates by mining platform Luxor Technologies that Texas has the highest amount of mining activity of any state, as much as 25% of the U.S. total. Readily available land, cheap electricity and friendly regulators have all been invoked as reasons why the state is so attractive to crypto miners. State officials have been taking steps to welcome the operations and encourage even more to follow. Gov. Greg Abbott tweeted in February that “The Lone Star State is poised to be a world leader in blockchain & cryptocurrency.” The state already is home to about 10 large-scale facilities that are connected to the grid and more are on the way.
That sounds like a lot more jobs and tax revenue, so what’s the problem?
The mining operations require a lot of electricity to power all those computers. Sen. Elizabeth Warren, D-Mass., and other Democrats, sent a letter last month to Pablo Vegas, the new CEO of the Electric Reliability Council of Texas, noting concerns about crypto mining and its electricity usage. They wrote the large-scale facilities already connected to the grid are regularly using more than 2 gigawatts, or the equivalent amount required to power all residences in the city of Houston twice over. They also wrote ERCOT’s longer-term projections keep rising, with over 27 GW of crypto load to be interconnected over the next four years. Energy researchers have described that as an “astronomically impossible” amount to add in such little time, according to the letter.
Critics worry placing so much additional demand on the power grid threatens its reliability and could translate into higher costs for other ratepayers in the system. Castle Rock, Colo.-based Riot Blockchain has run into local opposition over its plans to build a massive mining facility in Corsicana. Climate activists also have raised concerns about the carbon emissions associated with generating the electricity used to power the mining facilities.
Will Congress do anything about the situation?
Possibly. In their letter last month, Warren and her colleagues suggested it’s irresponsible for ERCOT to encourage crypto mining given the downsides associated with the operations. They requested detailed information from the grid operator about crypto mining operations and their interactions with the grid by this past Monday. ERCOT is expected to provide its response soon. Democrats could decide to hold hearings on the situation or offer related legislation, although it’s unclear how such efforts would fare in a new Congress if Republicans re-take control, as expected. Any discussion about the Texas power grid and its reliability is politically charged after the February 2021 storm that caused state-wide outages and left hundreds dead.
What does the industry say?
Texas Blockchain Council President Lee Bratcher said in an interview crypto miners are in a position to support the grid by providing flexible demand that can be easily curtailed in times of emergency. In that way the mining operations act as a “demand-side battery” and can improve grid reliability. Bratcher also said the mining operations can help the climate by providing support for new renewable energy projects. In a statement this week regarding the Warren letter, Bratcher said keeping a strong, healthy grid is important to the industry and it has a good working relationship with Texas leaders.